How Can Exchange Traded Funds Improve Crypto Trading?

Source: Pixabay

Investing in cryptocurrency has been rife since around 2013, with a greater uptake in recent years given the popularity of the investment opportunity and the drama surrounding the value of crypto coins, especially of Bitcoin (BTC).

While many stray away from the supposedly volatile crypto game, some are more attracted to the possibility that when the mainstream world finally realizes how beneficial blockchain cryptocurrency can be, they will be the ones to dictate the future of finance. But thanks to cryptocurrency exchange traded funds (ETF), it has never been simpler for the average investor to become involved with cryptocurrency and be in with a chance of shaping the economy.

What is an Exchange Traded Fund?

Exchange traded funds can be a beneficial instrument in the investor’s toolkit, no matter how experienced the investor may be. Essentially, ETFs combine the features of an index fund – which follows a series of pre-set commands to track or match the components of a market index – and a stock traded on an exchange. ETFs package up a series of stocks to be then sold as one single equity, which removes some of the legwork and hassle involved in investing and trading. The major benefit of an ETF is that they have a low barrier of entry. Not only do they require low fees to manage, they are also beneficial for the purposes of tax. The ease of entering into an ETF is why they have become the perfect weapon for the investor attempting to get into cryptocurrency.

Exchange Traded Funds and Cryptocurrency

The ETF has the benefit of being more stable, which could combat the problems with cryptocurrency’s volatility. This means that investors and traders can participate in the crypto boom and take advantage of the benefits of cryptocurrency without actually having to own them and being liable for any potential crashes. Cryptocurrency exchanges are still at risk from cybercrime, scams and theft, so ETFs can help mitigate against this. The crypto ETF would track the specific token, e.g. Bitcoin, Ethereum (ETH), Ripple (XRP) etc. They would be impacted by price changes throughout the day as various investors buy or sell the tokens. ETF investors own a proportion of the profits from the stakes that are traded on – i.e. the tokens.

Source: Pixabay

What are the Benefits of a Cryptocurrency ETF?

One of the major benefits of a cryptocurrency ETF is the safety feature compared to traditional digital crypto wallets. The fact that the asset itself isn’t owned means it cannot be stolen and the ETF provides a greater degree of cybersecurity. Moreover, the crypto ETF can be used to track multiple tokens at once, which is beneficial for those who are involved with cryptocurrency as a whole and not just one type of token. Essentially, a crypto ETF would remove the hassle of administration involved in monitoring various different tokens.

Cryptocurrency ETFs make the process of investing and trading on cryptocurrency easier and safer. The added security and ease means the barrier for entry is lower, and as with all ETFs, it is cheaper. Altogether, this will contribute to the continued success of the cryptocurrency industry.